Exam 5: Gross Income: Exclusions

Nicole's employer pays her $150 per month towards the cost of parking near a railway station where Nicole catches the train to work.The employer also pays the cost of the rail pass,$75 per month.Nicole can exclude both of these payments from her gross income.

Julie was suffering from a viral infection that caused her to miss work for 90 days.During the first 30 days of her absence,she received her regular salary of $8,000 from her employer.For the next 60 days,she received $12,000 under an accident and health insurance policy purchased by her employer.The premiums on the health insurance policy were excluded from her gross income.During the last 30 days,Julie received $6,000 on an income replacement policy she had purchased.Of the $26,000 she received,Julie must include in gross income:

Stuart owns 300 shares of Turquoise Corporation stock and 2,000 shares of Blue Corporation stock.During the year,Stuart received 150 shares of Turquoise as a result of a 1 for 2 stock split.The value of the shares received was $4,800.Stuart also received 100 shares of Blue Corporation stock as a result of a 5% stock dividend.Stuart did not have the option of receiving cash from Blue.The additional shares he received had a value of $7,200.Stuart's gross income from the receipt of the additional Turquoise and Blue shares is:

A cash basis taxpayer took an itemized deduction of $5,500 for state income tax paid in 2015.His total itemized deductions in 2015 were $18,000.In 2016,he received a $900 refund of his 2015 state income tax.The taxpayer must include the $900 refund in his 2016 Federal gross income in accordance with the tax benefit rule.

Under the Swan Company's cafeteria plan,all full-time employees are allowed to select any combination of the benefits below,but the total received by the employee cannot exceed $8,000 a year. I. Group medical and hospitalization insurance for the employee,$3,600 a year. II. ​ Group medical and hospitalization insurance for the employee's spouse and children,$1,200 a year. III. Child-care payments,actual cost but not more than $4,800 a year. IV. Cash required to bring the total of benefits and cash to $8,000. ​ Which of the following statements is true?

Sam was unemployed for the first two months of 2015.During that time,he received $4,000 of state unemployment benefits.He worked for the next six months and earned $14,000.In September,he was injured on the job and collected $5,000 of workers' compensation benefits.Sam's Federal gross income from the above is $18,000 ($4,000 + $14,000).

Cash received by an employee from an employer:

In the case of interest income from state and Federal bonds:

Emily is in the 35% marginal tax bracket.She can purchase a York County school bond yielding 3.5% interest and the interest is not subject to a 5% state tax.But she is interested in earning a higher return for comparable risk.Which of the following is correct:

What Federal income tax benefits are provided for college students?

Assuming a taxpayer qualifies for the exclusion treatment,the interest income on educational savings bonds:

Calvin miscalculated his income in 2013 and overpaid his state income tax by $10,000.In 2015,he amended his 2013 state income tax return and received a $10,000 refund and $900 interest.Calvin itemized his deductions in 2013,deducting $12,000 in state income tax and $30,000 total itemized deductions.As a result of the amended return in 2015,Calvin must recognize $10,900 of gross income.

Zack was the beneficiary of a life insurance policy on his wife.Zack had paid $20,000 in premiums on the policy.He collected $50,000 on the policy when his wife died from a terminal illness.Because it took several months to process the claim,the insurance company paid Zack $53,000,the face amount of the policy plus $3,000 interest.Zack must include $23,000 in his gross income.

Generally,a U.S.citizen is required to include in gross income the salary and wages earned while working in a foreign country even if the foreign country taxes the income.

The taxpayer's marginal tax bracket is 25%.Which would the taxpayer prefer?

Brooke works part-time as a waitress in a restaurant.For groups of 7 or more customers,the customer is charged 15% of the bill for Brooke's services.For parties of less than 7,the tips are voluntary.Brooke received $11,000 from the groups of 7 or more and $7,000 in voluntary tips from all other customers.Using the customary 15% rate,her voluntary tips would have been only $6,000.Brooke must include $18,000 ($11,000 + $7,000) in gross income.

Zork Corporation was very profitable and had accumulated excess cash.The company decided to repurchase some of its bonds that had been issued for $1,000,000.Because of an increase in market interest rates,Zork was able to retire the bonds for $900,000.The company is not required to recognize $100,000 of income from the discharge of its indebtedness but must reduce the basis in its assets.

Flora Company owed $95,000,a debt incurred to purchase land that serves as security for the debt.

If a scholarship does not satisfy the requirements for a gift,the scholarship must be included in gross income.

Swan Finance Company,an accrual method taxpayer,requires all of its customers to carry credit life insurance.If a customer dies,the company receives from the insurance company the balance due on the customer's loan.Ali,a customer,died owing Swan $1,500.The balance due included $200 accrued interest that Swan has included in income.When Swan collects $1,500 from the insurance company,Swan: